Open
Regionalism and Deeper Integration: The Implementation of ASEAN Investment
Area (AIA) and ASEAN Free Trade Area (AFTA)
Dr.
Lawan Thanadsillapakul
Part
17
ASEAN Service
Providers
A key question is who can be entitled to the offers under AFAS. AFAS is
a regional economic integration agreement implemented under Art. V of
GATS, and therefore preferential treatment under AFAS would in principle
be given to service providers of the ASEAN member countries or "ASEAN
service providers". Although AFAS did not define "ASEAN service
providers", it did provide for the denial of benefits in Art. VI
of AFAS:
The benefits of this Framework Agreement shall be denied to a service
supplier who is a natural person of a non-Member State or a juridical
person owned or controlled by person of a non-Member State constituted
under the law of A Member State, but not engaged in substantive business
operations in the territory of Member State(s).
Even though Art. VI of AFAS is a denial of benefits clause and not a definition
clause, the statement in Art. VI of AFAS was partially taken from the
definition clause of Art. XXVIII of GATS, so it may be said that Art.
VI of AFAS implies a definition of legitimate service providers who are
the ones not denied by Art. VI. This presumption is reinforced by the
fact that AFAS reiterated ASEAN countries' commitments to the rules and
principles of GATS and the provisions of GATS are enshrined in AFAS, particularly
as mentioned above.
Art.
VI denies benefits or privileges to a juridical person owned or controlled
by non-ASEAN persons only if such a juridical person is not "engaged
in substantive business operations" in an ASEAN country. Therefore,
a company duly constituted under the laws of an ASEAN country (which is,
in principle, an ASEAN juridical person) if it engages in "substantive
business operations" in an ASEAN country is thus entitled to the
benefits and privileges offered under AFAS as an ASEAN service provider.
Consequently, non-ASEAN nationals who establish a company in an ASEAN
country, which genuinely engages in substantive business in that country,
are able to enjoy benefits under AFAS. Since there are no other limitations
or specific conditions under AFAS, such a foreign-owned company can gain
advantages from the more liberal establishment rule to benefit from the
liberalisation in intra-ASEAN services trade, subject only to limitations
or conditions made by each individual ASEAN country under GATS-Plus, which
are also generally applied to all ASEAN service providers alike.
Thus, as with the AIA, the AFAS offers opportunities for non-ASEAN-owned
entities to benefit from the more rapid liberalisation of the intra-ASEAN
market. Like the AIA also, it will put pressure on each ASEAN country
to liberalise its national entry requirements, since a foreign-owned service
provider once admitted to an ASEAN country may thereby gain access to
the whole ASEAN market. Indeed, AFAS potentially goes further than the
AIA, since it has no cumulative equity requirements (although each country
may still retain some foreign shareholding limitation).
The
key issue is the meaning of "substantive business" which must
be engaged in by the foreign-owned company. The meaning of substantive
and the meaning of business should be considered together. Substantive
means real or genuine thus substantive business should mean a real or
genuine business engaged by a company. The company can be entitled to
privileges under AFAS only if it has already engaged in such real or genuine
business operations in one ASEAN country (the one where it is established)
before it can provide such services in other ASEAN countries. A further
issue is whether such business can be any kind of business, or needs to
be an actual services business which will be provided in the other ASEAN
countries. This has to be interpreted in conjunction with the earlier
interpretation of substantive business, which means a real business. If
a company engages in one business operation but seeks to provide another
business service elsewhere, the company obviously is not already engaged
in such substantive or real business service. So substantive business
should mean a real or genuine business, which it seeks to provide throughout
the ASEAN region. For instance, a foreign-owned company established in
Singapore engaged in the construction service business would be entitled
to the rights and benefits offered under AFAS by other ASEAN countries
to gain market access in the countries which have offered such rights
in the construction service sector. But if this company engages in insurance
business in Singapore and seeks to provide construction services in other
countries, it could not do so since it is not engaged, at that time, in
a real or genuine business in construction services, even though it has
a real business in insurance. Since the liberalisation of services intra-ASEAN
aims to strengthen and enhance trade in services in the region in order
to improve the efficiency and competitiveness of their service industries,
ASEAN countries would allow non-ASEAN owned providers only if they are
part of the ASEAN economy and really contribute economic value to the
ASEAN economy. Therefore, ASEAN countries welcome non-ASEAN nationals
to establish a company and operate substantive service businesses in ASEAN
countries and enjoy the rights and privileges offered by ASEAN countries
under GATS-Plus. In this way, ASEAN fulfils the dual objectives of intra-ASEAN
liberalisation in services and encouraging market access by service providers
from outside the region through the establishment of foreign-owned companies
in ASEAN countries. This means further enhancing FDI flows into the region.
Tables
6 and 7 show that the ASEAN countries' offers in GATS-Plus go beyond those
committed under GATS in various sectors and sub-sectors, particularly
in telecommunications, construction, financial and business service sectors.
Tourism is booming in the ASEAN region because all ASEAN countries are
liberalising regional tourism services. Maritime transport, which is generally
closed under GATS, is more liberalised under GATS-Plus. Laos opened her
maritime transport to all modes of supply and granted both market access
and national treatment. Even though Laos is a land-locked country, her
liberalisation of maritime transport in ASEAN is useful at the regional
level because any country, whether or not it has a coastline, has the
right to have ships navigating on the high seas. For instance, Austria
and Switzerland are land-locked countries but they have shipping interests
(UNCTAD, 1989: 152). Therefore, if Laos established a shipping registry
and introduced a Laos flag it would be open to all ASEAN ship-owners.
On the other hand, such a registry could permit ship-owners anywhere in
the world to register their vessels in Laos hence undertaking transportation
FDI in the country and in the region. This is another example of complementary
regional and international liberalisation.
Vietnam
granted national treatment and market access to service providers under
business service sectors for both commercial presence and presence of
natural person, in the sub-sectors of engineering services, in accounting
and auditing services, and in legal taxation services. This is due to
Vietnam's new emerging market and the lack of such specialists and professionals
caused by the prolonged Vietnam War. The inflows of trade and investment
to Vietnam came mainly from Asian and ASEAN countries, and have been accompanied
by service providers in business service sectors. For instance, there
are many Thai law firms(120) and lawyers who provide legal services in Vietnam because Thai investors(121) in Vietnam need legal services from their national lawyers who are trained
in both Thai and Vietnamese law. Also accountants, auditors, and engineers
are needed by Thai investors in Vietnam. The cases are the same for Singaporean
or Malaysian investors. Therefore, Vietnam welcomes these business service
providers. Since Vietnam endeavours to attract FDI and trade into the
country, the opening of related service sectors may help facilitate business
operations and promote FDI through the service providers who give advice
and professional services to their customers.
Part
18
_______________________________________________________________
(120)
For example Tilleke & Gibbins R.O.P. established in Thailand in 1893
by Pha Yod Muang Kwang, a Thai governor and Mr. William Alfred Tilleke,
a ceylonese, and later joined the company by Mr. Raph Gibbins. It is now
the oldest and largest independent law firm in Southest Asia composed
of more than 70% Thai lawyers of the total lawyers in this law firm providing
legal services in Vietnam and other Southest Asian countries. Boobchoo
Blumenthal & Richter Ltd, an international law firm based in Bangkok
composed of 35 % Thai lawyers providing legal services in Vietnam and
also other countries in the region, and Baker & Mckenzie (Thailand),
the biggest network law firm, also well established its branch law firm
in Vietnam providing legal services by Thai lawyers in this country.
(121)
Investors from Thailand have engaged in services trade and investment
in Vietnam since the very beginning when Vietnam was transformed from
the "battle field" to "trading field" initiated business
relation between the two countries by the Thai Prime Minister Chatchai
Choonhawan in 1989. Since then Thai investors have continued investing
in this country mainly in manufacturing industries but also in service
investment such as hotel, restaurant and legal professional (Ministry
of Commerce, Bangkok, Thailand : Thai Investment in Vietnam, mimeograph). |